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The manufacturing sector expanded for its eighth straight month in May thanks to higher demand, according to an HSBC report.

The Purchasing Managers Index (PMI) posted 52.5 points in May, after climbing to a record high of 53.1 the previous month.

The survey, which tracks manufacturing growth, began in April 2011 and bases its numbers on new orders, output, employment, supplier delivery times, and stocks of items purchased.

Vietnam's PMI index has remained above the no-change mark of 50 for eight consecutive months, indicating a steady expansion of manufacturing.

New orders (including exports) rose in May, but slightly less than in April.

Panelists reported that the new tonnage rules had some effect on manufacturing as they require suppliers to make more journeys to deliver the same amount of goods.

Many new highway weigh stations were put into operation in the middle of April to put a stop to rampant overloading.

Delivery times lagged to the greatest extent in the survey's history; manufacturing costs rose as a result.

But most manufacturers said they have maintained or even reduced their prices to stimulate demand.

In its regular commentary on the PMI report, Trinh Nguyen, Asia Economist at HSBC, said the added shipping cost is a real concern as it “comes at a time when exporters already incur high logistical costs.”

Nguyen said profit margins are being squeezed but weak domestic demand puts manufacturers in the untenable position of having to raise costs.

“We expect the State Bank of Vietnam to keep rates steady to support domestic demand.”